80. Which of the following activities will increase a firm’s current ratio?
81. Which of the following will increase a firm’s quick ratio assuming no other accounts
change?
82. Which of the following statements is correct?
83. A firm has a profit margin of 12 percent; total asset turnover of 0.55 and an equity
multiplier of 2.2. What is the firm’s ROA and ROE?
84. Which of the following statements is correct?
85. Which ratio assesses how efficiently a firm uses its fixed assets?
86. Which ratio measures how many days inventory is held before the final product is sold?
87. A firm reported year-end sales of $20 million. It listed $7 million of inventory on its
balance sheet. Using a 365-day year, how many days did the firm’s inventory stay on the
premises?
88. A firm ended the year with an average collection period of 50 days. The firm’s credit sales
were $11 million. What is the firm’s year-end balance in accounts receivable?
89. A firm reported sales of $10 million. It had a debt ratio of 40 percent and total debt
amounted to $3 million. What was the firm’s capital intensity ratio?
90. A firm reported working capital of $5.5 million and fixed assets of $20 million. Its fixed
asset turnover was 1.2 times. What was the firm’s sales to working capital ratio?
91. Which of the following statements is correct?
92. Calculate the times interest earned ratio using the following information. Sales = $1.5
million, cost of goods sold = $800,000, depreciation expense = $100,000, addition to retained
earnings = $85,000, dividends per share = $1.2, tax rate = 30 percent, and number of shares of
common stock outstanding = 100,000. Assume the firm has no preferred stock.
93. You are considering a stock investment in one of two firms (A and B), both of which
operate in the same industry. A finances its $20 million in assets with $18 million in debt and $2
million in equity. B finances its $20 million in assets with $2 million in debt and $18 million in
equity. Calculate the equity multiplier for the two firms.
94. You are considering a stock investment in one of two firms (A and B), both of which
operate in the same industry. A finances its $20 million in assets with $18 million in debt and $2
million in equity. B finances its $20 million in assets with $2 million in debt and $18 million in
equity. Calculate the debt-to-equity ratio for the two firms.
95. Which of the following statements is correct?
96. Common-size financial statements:
97. A firm reported a profit margin of 8.5 percent, total asset turnover of 0.85 times, debt–to–
equity ratio of 0.90 times, net income of $550,000, and dividends paid to common stockholders of
$100,000. The firm has no preferred stock outstanding. What is the firm’s internal growth rate?
98. A firm has a debt ratio of 45 percent, capital intensity ratio is 1.3 times, profit margin is 10
percent, and dividend payout ratio is 30 percent. Calculate the sustainable growth rate for the
firm.
99. A corporation has a total asset turnover of 2 times, ROA of 12 percent and EM of 1.17.
What is this firm’s profit margin and debt ratio?
100. A firm’s year-end price on its common stock is $55. The firm has a profit margin of 6
percent, total assets of $75 million, a total asset turnover ratio of 0.9, no preferred stock, and 2.5
million shares of common stock outstanding. Calculate the PE ratio for the firm.
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101. A firm reported an ROE of 19 percent. The firm’s debt ratio was 45 percent, sales were
$12 million, and the capital intensity ratio was 1.1 times. Calculate the net income for the firm.
102. Firm A and Firm B have the same total assets, ROA and profit margin (greater than 0).
However, Firm B has a higher debt ratio and interest expense than Firm A. Which of the following
statements is correct?
103. Which ratio measures the number of dollars of operating cash available to meet each
dollar of interest and other fixed charges that the firm owes?
104. A firm has an ROE of 14 percent and a debt ratio of 40 percent. If the total asset turnover
is 3.4, what is the firm’s profit margin?
105. The term “capital structure” refers to:
106. What is the debt ratio for a firm with an equity multiplier of 3.5?
107. A firm has EBIT of $300,000 and depreciation expense of $12,000. Fixed charges total
$44,000. Interest expense totals $7,000. What is the firm’s cash coverage ratio?
108. Which ratio measures the operating return on the firm’s assets irrespective of financial
leverage and taxes?